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Shettima Gana:Why FG must continue with fuel subsidy

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Former Commissioner of Agriculture and Natural Resource in Borno State, Shettima Umar Abba Gana, is now the Acting Chairman, Revenue Mobilisation Allocation and Fiscal Commission (RMAFC). In this interview with ABDULWAHAB ISA, he says that unlike oil that is located in five or six states, the presence of solid minerals across the land qualifies every local government and state to benefit from 13 per cent derivation. Excerpts:

 

The Revenue Commission embarked on advocacy campaign across the states on resources diversification, could you share the outcome of this exercise with us? The result has been very positive. The reason we took that line was simply because depending on only one source – oil for revenue has opened Nigeria to vicissitude of oil price fluctuations. Revenue Commission has identified two veritable sources of income, the solid minerals and agriculture. Apart from their high potential in Nigeria, the two sectors are conveniently available in every state and every local government in equal proportion. That means unlike oil that is located in five or about six states, there is presence of solid minerals everywhere. Every local government and state will benefit from derivation fund. The commission for the first time two years ago worked out the 13 per cent derivation of solid minerals. About N15 billion was collected as taxes and royalties from solid minerals, which was included in the sharing formula as applicable to the 13 per cent of oil revenue. We want the states to see the benefits of allowing solid minerals to be developed because they will also have earned 13 per cent of whatever revenue that comes out from solid minerals so developed. That was the main reason why we pursued the diversification of revenue across states and local governments.

How many states have benefitted from 13 per cent derivation?

Mostly all the states in varying degrees. Some get large, some small depending on the level or quantity of solid minerals. But if you want the figure, we will get it for you.

Could you give an insight on tax audit exercise set up by the commission to establish tax liability of states, MDAs and local government councils. We heard some defaulting states and MDAs pleaded for penalty waiver. What is the position of your commission?

Waivers are for the penalties, the funds itself have to be paid. The amount is about N168 billion and this include the ones owed by some federal MDAs, some states and their MDAs and the local government. Some taxes were supposed to come to the federation account totalling about N168 billion. We are doing reconciliation and as they are paying, some taxes are becoming due. It’s the penalty they are pleading to be granted waiver on.Will the Commission accede to their request on waiver? We’re talking with the federal ministry of finance, the Federal Inland Revenue Service and other agencies on how to handle that. They gave their reasons and we have to listen to them.

The fuel scarcity is back ( in Abuja). As usual, experts are engaging in arguments on why fuel subsidy should be retained or discarded. The NNPC said it bore certain portion of landing cost as a subsidy. The argument rages. What is RMFAC position?

Traditionally, the Commission is always in support of full deregulation of petroleum industry and is against subsidy depending on time. There is a time to do it. There is also a time it can’t be done. For now, it’s not proper to deregulate, we are supporting introduction of subsidy. Mark my word, I said for now. The reason being that, the current rise in the price of fuel is induced by increase in crude production cost, the crude price may also be coming down.

Would the price be coming down again?

We should give it sometime to see the real cost of crude, at what price will it stabilize, then we can begin to talk about removing subsidy. Interestingly, Nigeria has just come out of recession, removing fuel subsidy will jeopardise the fragile growth recorded post-recession. If you increase the price of fuel now, it will increase inflation and it will reverse the modest gain. What we are saying is, let the recovery from recession be strong enough; allow economy derivatives to be strong before contemplating removing subsidy. For now, the recovery process of the economy should be allowed to run its course before subsidy is removed.

Have you communicated this position to the federal government?

We mentioned it, we spoke in many fora when we had the opportunity to speak. We’ve not been asked but we made our opinion known in the public. What is going on is a public discussion and we contributed our own opinion on the subject at hand.

The idea of a revised revenue formula, which has been on the table of Commission, has been described as a mere wish hard to realise. Any new update on proposed new revenue formula?

Revenue formula is something the Commission continuously need to study. We did the study and we will continue to study and monitor it. The issue of revenue formula is a bit difficult because the basic building block of revenue formula is constitution itself. The constitution has given exclusive function to the federal, give concurrent functions to the federal, the states and the local government, right? Whatever you are going to give, each tier of the government has to follow what that tier of government has been asked to do by the constitution. If the constitution says, you should do ABC & D, you must be given money to do the ABCD. Whatever we are going to do in the review of revenue formula a major aspect of it is going to depend on the constitution amendment. Would you now transfer some assignment from exclusive federal to exclusive state? Once you live it as concurrent, it means that both of them will share the money. These have to be looked at and we are looking at it and we will recommend to the government what should be done and how. Whenever concrete proposal comes out, it will go to the National Assembly.

Where exactly is the new revenue formula, is it with the National Assembly or the presidency?

Nothing has been sent to the National Assembly nor the presidency. But that is not to say we have not been engaging in discussion with them. Of course, we have been engaging in discussion with the presidency, that one is ongoing. We continue to discuss on various issues but nothing has been sent to anybody to say, this is new revenue formula. But as we sit here, we are continuously analysing the trend, looking at all the dynamics and how it will look like. We are doing a lot of work in-house.

How soon do Nigerians expect it to be out?

I don’t know. Remember I just told you that the building block is the constitution and the debate is on about its amendment. I can’t say right now when but immediately we have something of substance it will be made public.

Your Commission is facing man power shortage. Out of the 37 Commissioners, one from each state of the federation including the Federal Capital Territory(FCT) only nine are currently on board. The rest have resigned having served out their tenure and no replacement for them. How do you run a Commission with a handful commissioners that don’t form quorum?

No, it didn’t affect the workings of the commission. With five or six Commissioners, the commission will function. The staff are there working. What has happened in most instances is that, we look at the quorum as dictated by the constitution and by the Act establishing the Commission. The Act says one third of existing members. So, if you are 10, three or four form a quorum you can work. But the constitution says five. If you get figure of five of existing members you can work. We have enough commissioners to do our work and we are working effectively. Remember constitution requires commissioners and chairman, people of unquestionable integrity. Whether a state hasn’t got a commissioner here, we work as if no commissioner is missing.

Adequate funding is key to a hitch-free administration of commission but this has been a major challenge of the Commission. To what extent has poor funding affected RAMFAC operations?

Is been difficult but the understanding is that, it’s a bit difficult across the board. The issue of oil price collapse has reduced drastically the government’s income. But we are working, we are doing our best and we are still on the ground, tasking ourselves in the face of economic challenge to bring out the best in us and meet our constitutional mandate. We have funding challenge, which is true. No body dispute that but we are coping and doing our best. As you can see every month money is being allocated to each of three tiers of government at Federation Account Allocation Committed (FAAC). We are the secretariat of post-mortem, we are the secretariat of technical session. We play the major role in FAAC, we are doing our work.

As one of the key stakeholders in the federation account, what is the position of Revenue Mobilization Allocation and Fiscal Commission regarding debate on propriety of federal government decision to withdraw $1 billion from the balance of Excess Crude Account for prosecution of insurgents’ war?

The Commission is a bit straight forward and remain guided by the constitution. There are three beneficiaries of the federation account- the federal, the states and the local government. If on the floor of the National Economic Council Meeting a decision to share money takes place and at that meeting, the vice – president was there representing the federal, the states’ governors were there, they are representing the states and local government, that satisfies the constitution. That the owners have decided, all the three have decided amongst them; I don’t know who says no, but if they had a decision after the NEC meeting and said, a decision has been taking, then of course that is it.

But what the Revenue Commission will attest to is: Even if you are going to take the money out to fight insurgency, there are two issues here: The 13 per cent of the state production, that 13 per cent must be removed and paid to those states because derivation must first come out before any sharing of the money. The particular period the excess crude money was withdrawn, that month there must have been 13 per cent allocation formula given by the revenue commission.

That formula has to be applied to the 13 per event of that money to the states that produced the oil first, before the rest of money – 87 per cent is taken to prosecute insurgency. Insurgency is a serious security challenge spreading across some states. It’s no longer restricted to Boko- Harram areas. States that are safe today, it will be in their interest to support every step being taken to curtail insecurity because it could spread to them.

The revenue commission can’t say no to a decision taken on the floor of NEC. National Economic Council is made of shareholders of this fund. It’s a collective decision and the constitution is satisfied at that point the decision was taken. The only thing, is that the 13 per cent must be removed and shared to states that produced the oil first because constitution says anything you are sharing, remove the 13 per cent first before using the balance.

You mean that 13 per cent to be removed first and shared to oil producing states before applying the balance for insurgency prosecution?

Yes. I know some states have complained and they are right because that is what the constitution says. Everything commission does, we adhere strictly to the provisions of constitution. In fact, I have a copy all the time in my table here (he raised a copy of the constitution)- that is where we derive our powers, that is where we get our functions. Anything we are doing that violates the constitution, we will head to the supreme court. Everybody, including the president swears to uphold the constitution.

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Tincan Customs chief to implement 48-hour cargo clearance

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Customs Area Controller (CAC), Tin Can Island Port Command, Musa Baba Abdullahi has reiterated the command’s unshaken commitment to achieve 48hour cargo clearance from the port without compromising revenue collection and national security.

The customs chief said efforts are being put in place to maximise benefits of technology and build the command’s manpower to meet with the growing challenges of modern trade.

 

While addressing maritime journalists in his Apapa office, Musa identified swift dispute resolution as a key component to facilitate trade. He said the command has put in place a faster mechanism to address any area of disagreement in interpretations of guidelines for duty collection and other related matters.

 

He added that a committee put in place for disputes resolution meets as soon as any dispute arises to avoid port users incurring costs caused as a result of delays in resolving such disputes.

 

According to him, there is a quicker process of bringing issues to his attention and contacting the headquarters where necessary to avoid delays associated with such disagreements. He said the command has stepped up efforts at keeping officers and relevant stakeholders abreast with the use of technology for the purpose of customs operations.

 

The Controller disclosed that senior officers and licensed customs agents are being trained at the command’s Information Communication Technology (ICT) Centre on the latest Nigeria Customs Information System (NICIS 2) in batches.

 

Musa said the training and retraining of customs personnel and stakeholders will continue with a view to getting as many persons as possible knowledgeable in the workings of the system.

 

He also stressed the need for all stakeholders to increase their levels of compliance with rules and improve on their knowledge as ways of achieving seamless flow of trade thereby achieving faster clearance of goods from the port.

The Controller also advised the maritime media to uphold the ethics of their profession and be fair and truthful in all they do.

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Early rainfall to boost Nigeria’s cocoa mid-crop

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Nigeria’s mid-crop cocoa output for 2017/18 could rise by 15 per cent from last season, helped by a mix of rainfall and sunshine in the main growing regions which has helped the trees, President of Cocoa Association of Nigeria (CAN) Sayina Riman said in a recent interview with Bloomberg.

 

Drought cut last season’s mid-crop harvest by 40 per cent. The dry weather continued into the main crop of the new season.

 

Riman said the drought affected the trees, reducing output of between 300,000 tonnes and 320,000 tonnes projected at the beginning of the 2017/18 season.

 

He said that early rains in March and April have helped boost the mid-crop, which could see the season’s output close at around 290,000.
Riman farms on a 170 hectare cocoa plantation in Nigeria’s second-biggest region of Cross Rivers.

 

The cocoa season in Nigeria runs from October to September, with an October-to-February main crop and a smaller light or mid-crop that begins in April or May and runs through September.

 

“Despite the drought of last year which affected cocoa we believe we would be close to 290,000 tonnes for 2017/18 season,” Riman told Reuters.

 

The International Cocoa Organisation (ICCO), however, gives much lower estimates of Nigerian cocoa output. It forecast last season’s production at 225,000 tonnes.

 

Riman did not give a reason for the discrepancy. Nigerian government production figures are also significantly higher than ICCO estimates.

 

Nigeria has recently emerged from recession and a currency crisis which caused a chronic dollar shortage, forcing exporters to under-invoice their goods in order to use the foreign exchange black market to get premium for their hard currency.

 

The action caused the West African country slip to the sixth producer of cocoa in the world at the peak of the crisis. Riman said Nigeria was getting back to number four grower as exporters now use the official currency markets.

Riman said Nigeria was working on improving its bean quality especially with renewed demand from Europe.

 

However, bean count, a measure of the number of beans needed to produce 100 grams of cocoa, reached as high as 140 for the main crop.

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Rising Nigerian bonds drags yields down

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Nigeria’s local-currency bonds are on a roll, rising for the last eight days and driving their yields below Turkey’s for the first time in more than two years.

 

The average rate on Nigerian government bonds has fallen around 400 basis since an August-peak to 13 per cent. Yields are now 100 basis points below the Central Bank of Nigeria’s benchmark interest rate of 14 per cent, where its been held since July 2016.

Investors have piled into the naira market thanks to slowing inflation, a stable currency and rising Brent crude prices, which climbed about 25 per cent in the past six months to more than $70 a barrel. In contrast, they’ve turned bearish on Turkey, which has the worst-performing local bonds in emerging markets this year, because of accelerating inflation and loose monetary policy.

 

Central Bank Governor, Godwin Emefiele, may be tempted to commence his long-touted easing cycle and help revive the economy that has faltered since the 2014 oil crash. While that would reduce the attractiveness of naira assets, Nigerian yields are still high relative to other major emerging markets. Aside from Turkey, Argentina and Egypt’s bonds are the only ones to yield more in the Bloomberg Barclays EM Local Currency Index.

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